Capitol Comments

The 113th Congress was sworn in today and the new freshman class found their seats still warm from predecessors who worked well into the New Year to pass a cliff averting tax compromise.   While the drama over the fiscal cliff may have passed for the moment, the new Congress faces another set of crisis-laden deadlines that could have big implications for state budgets.

Despite all of the drama over the past few weeks, it looks like both sides are ready to split the difference.  The President began the negotiations by calling for $1.6 trillion in tax revenue, Speaker Boehner countered with $800 billion.  A deal would likely include roughly $1.2 trillion, the midpoint between both first offers.  The president began by stating that any deal must spare social safety net programs and offering only $400 billion in ill-defined cuts while Speaker Boehner said that entitlement reform and other spending cuts must form the majority of any deal.  Both sides are now hinting at a compromise including equal amounts of revenue and spending cuts.  

Even in a non-election year presidential budget proposals are generally more about political aspiration than legislative action.  However, in the present political environment few if any of the President’s major initiatives are likely to survive Congressional scrutiny.  Despite dim political prospects, the President’s budget does offer important indications of the priorities and goals for the administration should the President win a second term.

While CSG supports efforts by Congress to promote economic growth by safeguarding intellectual property, it has not endorsed either the Stop Online Piracy Act (SOPA) or the Protect Intellectual Property Act (PIPA) currently being considered in Congress. 

Now that the requiem has been written for the Super Committee the question is what does “sequestration” mean for state budgets.    The bottom line is that the collapse of Washington’s latest effort to set the federal budget on sound fiscal footing is a mixed bag for the states.   Medicaid represents the center of gravity of the state-federal fiscal relationship, and the Super Committee’s failure to reach a compromise has spared the program from near term cuts.  However, the nearly $190 billion in “discretionary” pass through grants received by state and local governments are squarely in the cross hairs of the sequestration process.

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